• Chancellor raises annual allowance threshold from £110,000 to £200,000
  • Sunak says it lifts 98 per cent of consultants out of taper altogether
  • The move will cost Treasury £2.2bn by 2025
  • Will cover all staff including managers, not only clinicians

The government has raised the threshold for where the annual allowance taper is applied from £110,000 to £200,000 in a bid to address the NHS’ pensions crisis.

Chancellor Rishi Sunak announced the raise to the pensions tax relief floor in today’s Budget. The measure will come in next month.

Mr Sunak said the changes will lift 98 per cent of consultants, and 96 per cent of GPs, out of the taper altogether. The government hopes this can slow the number of doctors cutting their hours, or refusing extra shifts, due to the pensions crisis.

It will cover all individuals — not only clinicians, as had been the case with previous proposals, and with interim measures put in place over winter. 

It means individuals who earn below £200,000 will be eligible to receive the full £40,000 annual allowance. The move exceeded earlier reports that the threshold would be increased to £150,000, as reported by the Financial Times last week.

Meanwhile, the lifetime allowance, the maximum amount an individual can put into their pension pot over the course of their life, will rise by £90,000 to £1,073,100 from April next month.

The change will be seen a step forward by many, but it falls short of scrapping the taper, introduced in 2016 altogether. The British Medical Association and other senior medics have long called for it to be removed in its entirety.

An NHS England spokesman said: “This is a very welcome answer to the pensions problem that has affected many NHS staff, and it also has the benefit of both simplicity and fairness.

“NHS England will continue to deliver on our commitment to clinicians for 2019-20 and make sure we will now work with local NHS employers to ensure that today’s announcement makes a positive difference for staff.”

NHS Providers chief executive Chris Hopson welcomed the announcement but warned ministers to “listen carefully” to feedback from trust leaders on the impact of this policy.

He said: “It will be important to understand whether this change will enable the most experienced clinicians to predict whether they will receive an annual pension tax bill, and how large that will be.

“We will also want to check that senior staff will not be prevented from taking promotions and extra responsibility, and that local trusts can address these issues through local flexibilities.”

Vishal Sharma, chair of the British Medical Association’s pensions committee, said the government’s announcement today means ministers have “finally listened”. But Dr Sharma warned the policy change will prove “more costly” [to the government] than the BMA’s proposed solution of removing the annual allowance from defined benefit pension schemes”.

Derek Alderson, president of the Royal College of Surgeons, said they are “delighted” with the government’s announcement, adding: “The changes announced in today’s Budget should allow the vast majority of senior doctors and surgeons to work additional hours for the NHS.

“This could be particularly vital in the coming weeks and months.”

Updated 11 March at 8.30pm to include NHSE’s comment.

NHS managers included in government pensions ‘fix’